The U.K.'s biggest weapons dealer secretly paid a Saudi prince $2 billion over more than a decade for negotiating Britain's largest arms deal, allwhile the British government looked the other way, the BBC reports.
'Yes, we paid agents. Nothing illegal about that. It was absolutely in accordance with the law at the time.' —Former chief executive of BAE Sir Raymond Lygo
Prince Bandar bin Sultan, a former Saudi ambassador to the U.S., reportedly pocketed the equivalent of up to $240 million a year from arms dealer BAE Systems — the prime contractor in the $80-billion Al-Yamamah arms agreement.
Under the terms of the confidential 1985 deal, Britain equipped Saudi Arabia with weapons and 100 Tornado fighter jetsin exchange for oil, according to the upcoming report from the BBC's Panorama program. The details of the contract emerged from a Serious Fraud Office (SFO) investigation, reports said.
Whether or not the payments were illegal is still a murky area, as it depends on whether the U.K. company continued funnelling money to Prince Bandar even after 2001 — the year when the U.K. outlawed bribery of foreign officials.
"Yes, we paid agents. Nothing illegal about that," former chief executive of BAE Sir Raymond Lygo told the BBC. "It was absolutely in accordance with the law at the time … there was nothing untoward about the deal whatsoever."
ButLygo denied any connection with Prince Bandar and any knowledge of the secret payments.
Funds channelled through BAE, MoD
The prince also declined to comment on the investigation, the BBC said in a statement Wednesday.
According to Panorama's sources, Britain's Ministry of Defence authorized the payments on a quarterly basis, and the funds were channelled through BAE and the Ministry of Defence before making their way back to the prince.
The payments were discovered during an SFO investigation into the Al-Yamamah deal, specifically allegations that BAE Systems ran a secret "slush fund" for the Saudi royal family so that Saudi officials would continue doing business. However, Britain's Attorney General Lord Peter Goldsmith halted the probe in December 2006.
Blair defends government
British Prime Minister Tony Blairdefended hisgovernment's actions on Thursday, telling reporters from the G8 summit in Germany that the investigation "would have led … to the complete wreckage of a vital relationship for our country." He added that it could have cost thousands of Britons their jobs.
Blair refused to comment on the specific allegations raised in the BBC report.
The BBC said that the Panorama probe, which will be broadcast June 11, found that hundreds of millions of dollars from the U.K. were going to two Saudi Embassy accounts in Washington. But in fact, the apparent government accounts were actually a channel to Prince Bandar's personal account.
"The BBC's Panorama program has established that these accounts were actually a conduit to Prince Bandar," a BBC statement said, adding that "the purpose of one of the accounts was to pay the expenses of the prince's private Airbus."
'Major parliamentary inquiry'
Prince Bandar, who served for 20 years as the U.S. ambassador, is now Saudi Arabia's national security adviser.
Roger Berry, who chairs a House of Commons committee that reviews arms deals, said Thursday that the matter of the alleged secret payments must be thoroughly investigated.
"It's bad for British business, apart from anything else, if allegations of bribery popping around aren't investigated," Berry told BBC radio.
Liberal Democrat treasury spokesman Vince Cable called for a "major parliamentary inquiry" during an interview with the BBC. "It is one thing for a company to have engaged in alleged corruption overseas. It is another thing if British government ministers have approved it," he said.